U.S. Supreme Court throws out challenge to private-school tax credits - East Valley Tribune: East Valley Education News

U.S. Supreme Court throws out challenge to private-school tax credits

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Posted: Monday, April 4, 2011 9:47 am | Updated: 1:58 pm, Mon Apr 4, 2011.

The nation’s high court on Monday threw out a lawsuit challenging state tax credits to help students attend private and parochial schools, saying foes of the system lacked standing to sue.

The 5-4 by the U.S. Supreme Court ruling may dash the last hopes of those who sought to halt the credits. The Arizona Supreme Court previously upheld their legality.

But attorney Paul Bender, who argued against the credits, pointed out the justices sidestepped the question of whether the credits are constitutional. He said that leaves the door open for a challenge — assuming foes could find someone to lead the case whom the high court believes actually has been harmed by the credits.

At issue is a 1997 law that allows Arizonans to get a dollar-for-dollar credit on what they owe the state in income taxes for money they donate to organizations that provide the scholarships for private and parochial schools.

Individuals have been able to divert up to $500 a year, or double that for couples. Legislation signed last year by Gov. Jan Brewer will allow that to be adjusted annually for inflation.

Last tax year, Arizonans diverted more than $43.2 million to the scholarship organizations. A separate law that gives similar dollar-for-dollar credits to corporations cost another nearly $7.3 million in revenue in 2009, the most recent year’s figure available for that category.

Challengers said the system is an illegal subsidy of religious schools.

They pointed out that the organizations that accept the donations and give out the aid can decide where those scholarships can be used. And the largest organizations give scholarship vouchers to parents only if they agree to send a child to a religious school.

For example, the Catholic Tuition Organization of the Phoenix Diocese limits its funding to students attending Catholic schools. The Roman Catholic Diocese of Tucson has a similar program, and the Arizona Christian School Tuition Organization restricts its scholarships to be used at “evangelical” Christian schools.

But the high court never got to that issue. Justice Anthony Kennedy, writing for the majority, said the challengers, Arizona taxpayers represented by the American Civil Liberties Union who said they were being harmed, had no legal right to challenge the state’s tax policy.

“When a government expends resources or declines to impose a tax, its budget does not necessarily suffer,” Kennedy wrote.

He acknowledged that aid for education makes up a “significant portion” of the state budget. But Kennedy said that allowing funds to be diverted to help students attend private and parochial schools does not necessarily undermine that goal.

“By helping students obtain scholarships to private schools, both religious and secular, the school tuition organization program might relieve the burden placed on Arizona’s public schools,” he wrote. “The result could be an immediate and permanent cost savings for the state.”

That very point has been at the center of legislative debate over the credits since they were first enacted. That is because nothing in the law requires the scholarships provided by the individual tax credits to be given to children based on need.

Nor is there a mandate that these students transfer from public schools, with funds equally available to those parents who would send their children to private schools with or without the aid.

But Kennedy said it would not matter even if the scholarships actually have a net negative effect on state spending.

He said there is no way of knowing whether state legislators would compensate for any cash shortfalls by increasing the taxes on the challengers. Conversely, Kennedy said there is nothing to show that if the tax credits were voided that lawmakers would pass on that savings to taxpayers.

Kennedy also said that the individual challengers are free to pay their own tax bills without contributing to a scholarship organization, just as they are free to give to any of those organizations or give to any other charity.

The decision by the majority to sidestep the constitutional challenge drew criticism from Justice Elena Kagan. She said Arizonans could have sued if the state were making a direct appropriation to those private and parochial schools.

“Cash grants and targeted tax breaks are means of accomplishing the same government objective — to provide financial support to select individuals or organizations,” Kagan wrote for herself and three other dissenters.

“Taxpayers who oppose state aid of religion have equal reason to protest whether that aid flows from one form of subsidy or the other,” she continued. “Either way, the government has financed the religious activity.”

Bender said the next round of challenges may have to involve a parent who is denied scholarship aid based on where the student wants to go to school.

For example, he said a youngster might want help to attend a Jewish school but that organization has no more funds.

“We could send somebody to a Catholic (tuition organization) and say the kid wants to attend a Jewish school,” Bender said. At that point, he said, the Catholic group would refuse unless the child attended a Catholic school.

“I think that person might well have standing,” he said.

But attorney Tim Keller, who represents the Arizona School Choice Trust, one of the organizations that gives out scholarships, said he doubts challengers could find anyone who could claim “a direct injury coming from state action.”

“The court in its decision made it very clear this is not state action,” he said. “These are private dollars going to private organizations,” Keller continued, and do not involve the state giving money to anyone.

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